The Veterans Health Administration, which relies heavily on financial incentives to recruit and retain critical staff, did not try to recoup outstanding debts of nearly $800,000 in fiscal 2014 from employees who should have reimbursed the government, according to a new report from the Veterans Affairs Department’s watchdog.

The audit, which reviewed the department’s use of recruiting, relocation and retention compensation in fiscal 2014, found that VHA did not enforce repayment for roughly 55 percent of the estimated 238 incentives for which employees did not fulfill their recruitment or relocation obligations. That inaction, according to the IG, “resulted in an employee repayment liability of about $784,000 in FY 2014, or an estimated $3.9 million projected” for fiscal years 2015 through 2019. The inspector general reviewed incentives awarded to members of the Senior Executive Service as well as non-senior executives in VA’s Central Office with a fiscal 2014 start date. The audit, conducted between September 2014 and July 2016, included data from several randomly selected HR offices and medical facilities.

During the timeframe the IG conduced the audit, VA’s personnel system lacked the ability to issue alerts when employees who received one of the 3Rs changed jobs, making HR staff possibly “unaware of unfulfilled incentive service agreements.” The VA finished implementing a new personnel system in July 2016 that alerts HR staff when employees have any outstanding service obligations, including those related to the 3Rs.

The watchdog also found that the department overall didn’t properly oversee how recruiting, relocation and retention incentives were awarded, citing a failure to follow procedure rather than fraud. “VA’s inadequate controls over its 3R incentives represent an estimated $158.7 million in unsupported spending” projected for fiscal years 2015 through 2019.

In some instances, the VA failed to properly authorize the recruitment incentive before it was listed in job vacancy announcements. In other examples, the department offered such compensation for jobs that were not demonstrably hard-to-fill, the watchdog concluded. The VHA, which accounts for the lion’s share of the department’s overall spending on such incentives, “did not properly authorize 33 percent of the estimated 1,546 recruitment incentives and about 64 percent of the estimated 727 relocation incentives that VHA awarded to non-SES employees in FY 2014.”

The VA’s total spending on the 3Rs, however, decreased between fiscal years 2012 and 2015, from $115 million to $67 million.

The watchdog also concluded that the department lacked adequate workforce and succession plans that would foster less dependence on retention incentives. “We most frequently found in our sample that workforce and succession plans did not include details on efforts to reduce or eliminate the need for the incentive,” said the report. VHA employees, who include physicians and nurses, were paid retention incentives on average of almost four years.

The IG made several recommendations, all related to improving oversight by monitoring facilities’ compliance with proper procedures, as well as requiring them to collect any outstanding debts from employees who didn’t fulfill their 3R incentive service agreements. The VA agreed with all the watchdog’s recommendations, and since the review, has made good on several of them, including adding more internal controls and guidance related to the 3Rs, and ensuring the personnel system alerts HR staff when employees are obligated to repay the government and elevates those issues to the attention of upper management.

The watchdog suggested that the VA review whether it makes sense to limit how long certain employees continue to receive retention incentives, but the department pushed back on that. In an August 2016 response to the report, acting Assistant Secretary for Human Resources and Administration Meghan Flanz said that “it is imperative that management officials continue to have the ability to authorize retention incentives with no additional limits” to retain talented employees. “Any attempts to further limit or reduce flexibilities already available in regulation and VA policy may have a negative effect on VA providing high quality healthcare and meeting our Access to Care initiatives.”

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